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Student Loans, the Next Big Threat to the U.S. Economy?

By Caroline Salas Gage and Janet Lorin January 16, 2014

Tiffany Roberson works for the state of Texas as a parole officer, teaches part-time, and is living with her parents after having completed her master’s degree. She’s held off marrying her boyfriend of four years and starting a family because she owes more than $170,000 in federal and private student loans that she took out to pursue her education in criminal justice. “I’ve never gone into default,” the 30-year-old says. “What really hurts is people say I’m a bum for living at home.”

Stories like Roberson’s are sadly common in the U.S. Student loans today are one of the only deteriorating pockets of consumer credit, with balances and delinquency rates rising to record highs even as a strengthening economy allows Americans to reduce total borrowing. Outstanding student debt topped $1 trillion in the third quarter of 2013, and the share of loans delinquent 90 days or more rose to 11.8 percent, according to the Federal Reserve Bank of New York. By contrast, delinquencies for mortgage, credit card, and auto debt all have declined from their peaks.

The New York Federal Reserve’s move to measure the size of the student loan load says a lot about how concerned the central bank is about a possible threat to the economy. “Our job is to really understand what’s happening in the financial system,” and the “very rapid rise in student loan debt over the last few years” can “actually have some pretty significant consequences to the economic outlook,” New York Fed President William Dudley told reporters in November. “People can have trouble with the student loan debt burden—unable to buy cars, unable to buy homes—and so it can really delay the cycle.”

The federal government is the source and backer of most of the loans. “I’m always made very nervous by a credit market that benefits from government guarantees and is expanding very rapidly,” Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, said on Jan. 10 at a Greater Raleigh Chamber of Commerce event in North Carolina. “That’s what we’re seeing with student loans, and it’s what we saw with housing.” As the New York Fed’s Dudley explained in November, “to the extent that student loan burdens become very, very high, there are presumably going to be losses” to the federal government.

Economists at the New York Fed are analyzing student debt as part of their quarterly reports on national household credit. That project got started six years ago as the financial crisis unfolded, and the researchers and their then-boss, Timothy Geithner, realized there wasn’t a good way to study total consumer borrowing. As they began assembling their own figures, relying on a sample from credit reports from Atlanta-based Equifax (EFX), they discovered that data on student borrowing were particularly sparse because of gaps in the frequency and types of information available.



Consumer Sentiment in U.S. Unexpectedly Declined in January

Source: Bloomberg

By Katherine Peralta January 17, 2014

Consumer confidence in the U.S. unexpectedly declined in January, a sign spending may take time to accelerate early this year.

The Thomson Reuters/University of Michigan preliminary index of sentiment fell to 80.4 from 82.5 in December. Economists in a Bloomberg survey called for a reading of 83.5, according to the median estimate.

The report follows figures last week showing employment rose in December at the slowest pace in almost three years. While more job opportunities would help lift spirits, higher property values and rising equity prices are boosting household wealth and will keep consumers spending.

“The numbers tell us consumers are still likely to be cautious in spending,” said Michael Moran, chief economist at Daiwa Capital Markets America Inc., who projected a reading of 81. “I’m expecting to see some cooling off in spending in the first quarter.”

Read more: http://www.businessweek.com/news/2014-01-17/michigan-sentiment-index-decreased-to-80-dot-4-in-january

Customer: Elderly Squatters Take Over Queens McDonald’s, Just Won’t Leave

NEW YORK (CBSNewYork) — The meaning of the word “fast” may have been lost on some customers at a Queens fast food restaurant.

McDonald’s has long prided itself on its ability to make customers say “I’m loving it,” especially with its new McCafe atmosphere. But at one location in Flushing, elderly customers are sticking around for hours, CBS 2′s Don Champion reported Wednesday.

“They come here, and it’s like they live here sometimes,” said customer Kieran McCaffrey. “They buy one cup of coffee, and they’re literally here for hours. I never stay because there’s never a seat.”

McCaffrey and other customers have complained that groups of elderly regulars frequently check in but don’t check out.

Most of them live in nearby senior centers and come in groups.



Fox News To Harvey Weinstein: Jews Needed Guns During Holocaust So Nix Anti-NRA Film

Fox News host Martha MacCallum lashed out at Hollywood producer Harvey Weinstein on Thursday because he supported gun control in the United States while wishing that Jews could have fought back with firearms during the Holocaust.

In an interview with radio host Howard Stern this week, Weinstein revealed that he was working on a film about the National Rifle Association (NRA) because he opposed guns.

“I don’t think we need guns in this country and I hate it, and I think that the NRA is a disaster area,” Weinstein said. “I’m gonna make a movie with Meryl Streep and we’re gonna take this issue head on.”

“They’re gonna wish they weren’t alive after I’m done with them.”

It was that line that got Fox News host Martha McCallum and radio host Mike Slater fired up on Thursday.



DEA Official Freaks Out At Senate Hearing: Reckless Marijuana Legalization ‘Scares Us’

The chief of operations at the Drug Enforcement Administration railed against the legalization of marijuana on Wednesday, warning the “experiment” was highly dangerous.

“I have to say this… going down the path to legalization in this country is reckless and irresponsible,” James L. Capra said during a Senate hearing. “I’m talking about the long-term impact of legalization in the United States. It scares us.”

Resident in Colorado and Washington state voted in 2012 to legalize the recreational use of marijuana. The U.S. Department of Justice later said it would not target individuals and marijuana dispensaries that were in compliance with state laws.

Capra claimed marijuana legalization had failed in every place it had been tried.

“There are more dispensaries in Denver than there are Starbucks,” Capra remarked. “The idea somehow… that this is somehow good for us as a nation, that this is good for the next generation coming up is wrong. It’s a bad thing, and this body will get its door knocked on ten years from now and say, ‘How did we get where we got?’”



Russell Brand Rules Out ‘Little Ejaculations’ Like Voting — He Wants Revolution ‘B*kkake’

Actor Russell Brand told college students that drastic measures were needed to seize power from the corporate and political elites.

“They’re only in charge of us if we allow it,” Brand said. “Complete noncompliance, complete disobedience, then the alternatives will emerge. We need to create a paradigm that makes the old one obsolete. That’s what we have to do. Not comply to it, because then we’ll get drip-fed little measures. ‘Oh, well, we’ve given you recycling bins.’ Thanks! The planet’s still f*cked.”

Brand repeated his call for revolution Tuesday during a student discussion at The Cambridge Union, urging students to stop voting as a first step.

“I think (voting) is an act of compliance,” he said. “I’m not talking about apathy, I think you understand that about me. I’m saying, ‘No, I’m not complying with your ideas at all. I’m not going to turn up and put an X in a box, like an Xbox. It’s like an illusion, it’s a temporary reality. It’s meaningless, it’s pointless. It makes no difference. Give us something to vote for, and then we’ll vote for it.”

The actor and comedian said the current situation was so dysfunctional that rich and poor alike were suffering spiritual harm.



Homebuilders Remained Confident in January on Rising U.S. Sales

By Lorraine Woellert - Jan 16, 2014

Confidence among U.S. homebuilders held in January near its highest level in eight years, indicating the residential real-estate market will continue to contribute to economic growth in 2014.

While the National Association of Home Builders/Wells Fargo builder sentiment gauge fell to 56 from 57 in December, readings greater than 50 mean more respondents report good market conditions, figures from the Washington-based group showed today. The median forecast in a Bloomberg survey called for 58.

Home construction has been a source of strength for the economic expansion, propelled by job gains and rising property values. The market has weathered an increase in interest rates and prices are forecast to continue rising this year.


Europe Days From Lifting Reinsurance Ban on Iran Oil Exports

By Alaric Nightingale and James G. Neuger - Jan 16, 2014

Europe is days from suspending a ban on reinsuring tankers hauling Iranian oil, a measure that helped cut the nation’s crude exports by more than 50 percent when it was implemented.

The six-month relaxation starts Jan. 20 and will allow companies following European Union law to reinsure tankers shipping Iran’s oil to India, China, Japan, South Korea, Turkey and Taiwan, an EU official told reporters in Brussels today, speaking on condition of anonymity because he wasn’t authorized to be quoted by name. The step affects most of the world fleet because 90 percent of all merchant vessels are covered by members of the London-based International Group of P&I Clubs.

Iran’s oil exports plunged to about 1 million barrels a day last year from 2.5 million before sanctions started in 2012, according to the White House. The plan to ease the reinsurance ban was agreed in November, following negotiations between Iran and world powers seeking to curb the nation’s nuclear program. European companies are still barred from purchasing Iranian oil and the accord in Geneva doesn’t allow the Persian Gulf state to boost exports.

“Countries that were finding it difficult to lift their existing quotas of oil will be able to lift the oil that they are permitted to lift easily,” Abhishek Deshpande, an analyst at Natixis SA in London, said by e-mail. Still, buyer states must avoid increasing imports so that they don’t breach U.S. rules that remain in force, he said.



Iraq’s Maliki Seen as Flawed Champion to Fight Al-Qaeda

By Nayla Razzouk - Jan 15, 2014

Iraqi Prime Minister Nouri al-Maliki’s self-portrayal as the only viable barrier against a resurgent al-Qaeda has won support from the U.S. and Iran. Critics say he can’t solve the problem because he’s part of it.

Maliki urged residents of Fallujah in Anbar province on Jan. 8 to join government forces massing outside the city, held by al-Qaeda and allied forces since the previous week. The 63-year-old premier is receiving air-to-ground missiles and other equipment from the U.S., and has received offers of military aid from Iran, America’s main Middle Eastern foe.

Domestic opponents and analysts at Human Rights Watch and the London-based Royal United Services Institute say policies implemented by the Shiite-dominated government have enabled al-Qaeda’s revival among Iraq’s Sunni minority. With an election scheduled for April in the oil-rich nation, sectarian division is only likely to increase, they say.

Maliki’s opponents “don’t trust him, he has failed to keep promises and the whole sectarian conflict is of his making,” Gareth Stansfield, RUSI’s Middle East director, said in a telephone interview. Still, “Maliki is the least-worst scenario for the U.S., given the lack of other options.”

Maliki will seek to extend his eight years in office on April 30, battling for votes in a fractured political scene that includes 142 political groups representing Iraq’s Shiites, Sunnis and Kurds.



Best Buy’s Sales Decline Raises Doubts About Turnaround

By Matt Townsend - Jan 16, 2014

Best Buy Co. (BBY)’s decline in holiday sales, which triggered a 29 percent drop in its stock today, is raising doubts over Chief Executive Officer Hubert Joly’s turnaround strategy.

When Joly joined the world’s largest electronics chain in September 2012, he zeroed in on becoming price competitive with the likes of Amazon.com Inc. (AMZN) His theory was simple. Remove price from the purchase decision and consumers would stick with Best Buy because they can find a wide assortment of products, get advice from knowledgeable staff and test gadgets.

That approach failed to boost holiday sales in the U.S., which includes stores and online purchases. Even though the chain aggressively slashed prices, revenue from outlets open at least 14 months fell 0.9 percent in the nine weeks ended Jan. 4, the Richfield, Minnesota-based retailer said today. In addition, Joly’s price cuts will narrow profit margins by twice as much as the company expected in the fourth quarter.

“The holiday results highlight the well-known secular headwinds that Best Buy still faces and raise new questions about the company’s longer-term outlook,” Brad Thomas, a New York-based analyst at Keybanc Capital Markets Inc., wrote in a note to clients.

Thomas, who recommends holding the stock, projected a gain of 1 percent for U.S. same-store sales.


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